Busting the Biggest Myths About Buying a Home in 2024
As your local mortgage professionals, we've seen many misconceptions floating around that can make the already complex process of buying a home even more daunting. Let's debunk four of the most common myths about the current housing market, and set the record straight.
Myth 1: The Housing Market is on the Verge of Crashing, Just Like in 2008
Given the recent rise in home prices and interest rates, it's understandable to feel a bit anxious. Some buyers are even hoping for a market crash, thinking it will lead to a surge of affordable homes. However, today's market conditions are vastly different from those of 2008.
Back then, a combination of factors led to the housing market collapse: a surplus of new homes, lenient lending practices, and adjustable-rate mortgages that homeowners couldn’t afford once the rates increased. Today, the scenario is quite different.
There’s a significant shortage of homes, lending standards are stricter, and nearly half of all homeowners have more than 50% equity in their homes. Additionally, laws passed in 2010 have strengthened borrower verification processes, making it much less likely for a similar crash to occur.
Myth 2: Owners Will Never Sell Given Their Current Rate
Yes, the historically low mortgage rates of the past few years have made it incredibly appealing for homeowners to stay put. But life happens, and people will always need to move for various reasons. New job opportunities, growing families, retirees looking to downsize, and seniors moving closer to family or into assisted living are just a few examples.
While it’s true that the low rates were a unique circumstance, life’s unpredictability ensures that homes will continue to come on the market. So, don’t lose hope if you’re looking to buy—there will always be homes available, even in a competitive market.
Myth 3: As Rates Rise, Home Prices Will Drop
Many prospective buyers are holding out, thinking that rising interest rates will lead to a drop in home prices. However, the relationship between interest rates and home prices isn’t straightforward.
While higher rates can affect affordability, they don’t automatically cause prices to plummet. In reality, home prices are driven more by inventory levels. In popular areas, a well-maintained, move-in ready home can still attract multiple offers, even with higher interest rates.
Many buyers are adopting the strategy of "dating the rate and marrying the house," meaning they purchase their dream home now and plan to refinance later when rates potentially drop. Remember, today’s home prices could be even higher by the time lower rates return.
Myth 4: Good-Credit Buyers are Subsidizing Buyers with Bad Credit
This myth stems from misunderstandings about Fannie Mae and Freddie Mac’s new fee structures. These government-sponsored enterprises aim to make mortgages more accessible to first-time homebuyers with lower incomes but good credit. They don’t issue loans directly but work with lenders to lower their risk by guaranteeing certain loans. With the new fee structure, upfront fees are eliminated for first-time homebuyers.
So this change isn’t about credit scores—it’s about supporting first-time buyers who need a leg up. Buyers with poor credit still pay higher interest rates than those with good credit.
Final Thoughts
Navigating the housing market can be tricky, especially with so many myths and misconceptions. As your local mortgage pros, we're here to help you separate fact from fiction and make informed decisions. Remember, every market has its unique challenges and opportunities, and staying informed is your best strategy. Whether you're buying your first home or your fifth, understanding the realities of the market will help you navigate it confidently and we can help.
* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.